The Regulatory Environment - Labour Laws

India is a member of the International Labour Organisation and complies with conventions which it has ratified. It has enacted comprehensive legislation to provide a good working environment for labour and protect their interests. The government continously reviews various labour laws in line with changing circumstances. The following are the key labour laws:

• Industrial relations are regulated by the Industrial Disputes Act, which provides for just and equitable settlement of disputes through negotiations, conciliation, arbitration or adjudication.
• The Factories Act, 1948, regulates working conditions in factories. The Act prescribes minimum standards for working conditions and facilities related to manufacturing processes, handling and storage of materials, discharge of effluents, fire precautions, working hours and health facilities etc.
• The Minimum Wages Act 1948, empowers the appropriate Governments to fix and revise the minimum wages and allowances payable to workers and also to regulate the conditions of work such as hours of work, overtime, etc. for workers in the notified employment under their respective jurisdiction.
• The Payment of Bonus Act, 1956, requires payment of bonus to certain categories of workers whose wages do not exceed Rs.2,500 per month. The Act ensures payment of minimum bonus of 8.33 per cent per year, with maximum bonus not to exceed 20 per cent of salary or wage earned during the accounting year.
• The Payment of Gratuity Act requires the employer to pay gratuity to certain categories of workers on termination of service. This Act applies to all workers without any wage limit.
• The Employees' Provident Fund Act applies to workers whose wages do not exceed Rs.3,500 per month in some industries and establishments. The employer and the employee are required to make matching contributions of 8.33 per cent to 10 per cent of the employee's salary to the fund.
• The Employees' State Insurance Act covers sickness, maternity and employment related injuries. The Act applies to workers whose wages do not exceed Rs.3,000 per month.
• In addition to the above Acts, several states have enacted Shops and Establishment Acts which regulate working hours, prescribe minimum standards of working conditions and provide for overtime and leave salary payments to workers in certain categories of shops and other establishments.

Centre for Monitoring Indian Economy, Bombay
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Last updated: May 1995.